module 5 Flashcards
An increase in the value of other currencies tends to cause:
Select one:
a. U.S. goods to be cheaper than foreign goods
b. U.S. goods to be more expensive than foreign goods
c. Foreign goods to be more expensive to residents of foreign nations
d. Foreign goods to be cheaper to residents of the United States.
a. U.S. goods to be cheaper than foreign goods
If interest rates are expected to move higher in the Philippines than in the United States, the market expects that the Peso will: Select one:
a. Appreciate against the dollar
b. Depreciate against the dollar
c. Offer a higher real rate of return than the
dollar
d. Be selling at a forward discount
a. Appreciate against the dollar
If you have a commitment to pay a friend in Britain 1000 pounds in 30 days, you could remove the risk of loss due to the appreciation of the pound by
a. Buying dollars in the forward market for delivery in 30 days
b. Selling dollars in the forward market for delivery in 30 days
c. Buying the pounds in the forward market for delivery in 30 days
d. Selling the pounds in the onward market for delivery in so days
c. Buying the pounds in the forward market for delivery in 30 days
Which of the following statements is false with respect to the differences between being long or short in a forward contract?
a. Throughout the term of the contract, the settlement price is rarely changed
b. The long position gains if the price of the underlying asset appreciates dramatically
c. Irrespective of being long or short there is no exchange of money at the initiation of the forward contract
d. The short position is the one that is exposed to counterparty (or default) risk at the initiation of the forward contract
b. The long position gains if the price of the underlying asset appreciates dramatically
An appreciation in the value of the Us dollar against the British pound would tend to Select one
a. Discourage the British from buying American goods
b. Discourage Americans from buying British goods
c. increase the number of dollars that could be bought with a pound
d. Discourage US tourists from traveling to Britain
a. Discourage the British from buying American goods
A US export company scheduled to receive 1 million pounds six months from today can hedge its foreign exchange risk by:
Select one
a. Buying today 1 million pounds in the forward market for delivery in six months
b. Buying 1 million pounds in the spot market for delivery in six months
c. Selling 1 million pounds in the spot market for delivery in six months
d. Selling today 1 million pounds in the Forward market for delivery in six months
d. Selling today 1 million pounds in the Forward market for delivery in six months
Most foreign exchange trading occurs between a bank and
Select one
a. The National governments
b. Other banks
c. Corporations
d. Household investors
b. Other Banks
A corporation dealing in foreign exchange may desire to obtain an exchange quote between the pound and franc. whose values are both expressed relative to the dollar _____ are used to determine such a relationship
Select one
a. Spot exchange rates
b. Forward exchange rates
c. Cross exchange rates
d. Option exchange rates
c. Cross exchange rates
If 1 USD is was quoted at 0 9521 AUD yesterday and today the USD is trading at 0 9498 AUD, the USD has
Select one
a. Appreciated, and will purchase less Australian goods.
b. Depreciated, and will purchase less Australian goods.
c. Appreciated, and will purchase more Australian goods.
d. Depreciated, and will purchase more Australian goods.
b. Depreciated, and will purchase less Australian goods.
A decrease in the real exchange rate (quoted in terms of domestic currency per unit of foreign currency) is most likely to be associated with an increase in which of the following? Select one
a. Foreign price level
b. Domestic price level
c. Nominal exchange rate
d. None of the above
b. Domestic price level
Under a system of floating exchange rates, the franc would depreciate in value if which following occurs?
Select one
a. Price inflation in France
b. An increase in US real income
c. A decrease in the Swiss money supply
d. Falling interest rates in Switzerland
d. Falling interest rates in Switzerland
- What currency can purchase more USD?
Quotes from dealer A
Ratio Spot Rate
USD/SGD 1.2277
USD/CNY 6.2194
USD/SEK 6.5275
a. SEK
b. SGD
c. CNY
d. All three currencies are just the same
b. SGD
- A country’s currency will depreciate after
Select one
a. Its income is growing slowly relative to
the rest of the world
b. its inflation rate is lower than that of its
trading partners
c. The real interest rate is lower than real rates in other countries
d. The monetary policy of the count becomes more restrictive
c. The real interest rate is lower than real rates in other countries
Assuming everything else is the same, when a currency depreciates one can predict that:
a. The price level will rise and real GDP will rise
b. The price level will fall and real GDP will fall
c. Real GDP will rise, but price change is not predictable
d. The price level will rise, but real GDP change is not predictable Incorrect
a. The price level will rise and real GDP will rise
How many dollars will it take for a US citizen to purchase a Japanese product priced at 60,000 yen if the exchange rate is 1/89.95?
Select one
a. 667
b. 60000
c. 5397000
d. 8995
a. 667
If the BSP wants to manage peso inflation how can he do this via the USD/PHP Swaps?
Select one:
a. Do a buy/sell transaction
b. Do a sell/buy transaction
c. Ease overnight rates
d. None of the above
b. Do a sell/buy transaction
Over time, a depreciation in the value of a nation’s currency in the foreign exchange market will result
Select one
a. Exports rising and imports falling
b. Imports rising and exports falling
c. Both imports and exports rising
d. Both imports and exports falling
a. Exports rising and imports falling
Assume 1 unit of currency A is equal to 0.52
unit of currency B. 1 unit of Currency B is worth
which of the following?
Select one
a. 0.48 of currency A
b. 0.52 of currency A
c. 1.92 of currency A
d. 1.52 of currency A
c. 1.92 of currency A
The NZD/USD market bid-offer is 0.8368-0 8373 and the USD/SEK market bid-offer is 6 5241-6 5250. What is the SEK/NZD bid rate where you can sell SEK?
Select one
a. 0.183
b. 0.1283
c. 0.1831
d. 0.1282
a. 0.183
If a currency decreases in value as a result of government decree rather than market forces, the process is known as
Select one.
a. Devaluation
b. Depreciation
c. Deflation
d. Degeneration
a. Devaluation
The NZD/USD is trading at 0.8372 and the USD/SEK is trading at 6.5255. The NZD/SEK exchange rate is:
a. 5.6883
b. 0.1283
c. 7.7944
d. 5.4631
d. 5.4631
The exchange rate affects.
Select one:
a. The cost of imported goods
b. The country/s inflation rate
c. Employment
d. All of the above
d. All of the above
The spot rate on the NZD/USD is 0.8388, and the 180-day forward rate is 0.8288. This difference means:
a. Interest rates must be lower in the US than in New Zealand
b. Interest rates must be higher in the US than in New Zealand Incorrect
c. The NZD is expected to appreciate
d. The USD is expected to depreciate
a. Interest rates must be lower in the US than in New Zealand
A major difference between the spot market and the forward market is
Select one
a. The immediate delivery of currencies
b. The merchandise trade account
c. Currencies traded for future delivery
d. Hedging of international currency risks
a. The immediate delivery of currencies
The NZD/USD market bid-offer is 0.8368-0.8373 and the USD/SEK market bid-offer is 6.5241-6.5250. At what rate can you buy NZD/SEK?
a. 5.4634
b. 7.7929
c. 5.4594
d. 7.77965
a. 5.4634
If the interest rate on Swiss franc assets increases, the
Select one:
a. Demand for US. dollars will increase
b. Demand for Swiss franc currency will
decrease
c. Demand for the Swiss franc currency will increase
d. Demand for dollar assets will increase
c. Demand for the Swiss franc currency will increase
IF Canadian speculators believed the Swiss franc was going to appreciate against the US dollar they would
Select one
a. Purchase Canadian dollars
b. Purchase US dollars
c. Purchase Swiss francs
d. Sell Swiss francs
c. Purchase Swiss francs
Today’s spot rate for the Indonesian rupiah (IDR) is USD/IDR 9,690 and the New Zealand dollar (NZD) trades at NZD/USD 0.8400. The NZD/IDR cross rate is:
a. NZD/IDR 0.00087
b. NZD/IDR 11,535.71 Incorrect
c. NZD/IDR 8,139.6
d. NZD/IDR 8,700
c. NZD/IDR 8,139.6
Which of the following counterparties is most likely to be considered a sell-side (or offer-side) foreign-exchange market participant?
Select one
a. A large corporation that borrows in foreign currencies
b. A multinational bank that trades foreign exchange with its diverse client base
c. A sovereign wealth fund that influences cross-border capital hows
d. Both A and B
b. A multinational bank that trades foreign exchange with its diverse client base
Suppose that the exchange rate between the dollar and the peso changed from 6 pesos per dollar to 8 pesos per dollar. This change means that the:
A. Peso appreciated
B. Dollar depreciated
C. Peso depreciated
D. Both A & B
C. Peso depreciated
What can be said about the spot exchange rate of pounds for dollars if nominal interest rates are higher in the U.S. than in Great Britain?
A. It should exceed the forward rate of pounds for dollars
B. It should be less than the forward rate of dollars for pound
B. It should be LESS than the forward rate of dollars for pound
If there were an unexpected decline in the growth rate of the money supply in the U.S.
A. Real interest rates, output, and prices would fall, causing the dollar to depreciate.
B. Real Interest rates would rise. Causing an appreciation of the dollar.
C. Nothing would happen to exchange rates in the short run.
D. Real Interest rates, output and prices would rise, causing the dollar to appreciate.
B. Real interest rates would rise, causing an appreciation of the dollar.
If the exchange rate between Country A and B changes from A1.00 = B6.8 to B1.00 = A0.135, which of the following has occurred?
A. Country A’s currency has appreciated
B. Country B’s currency has appreciated
C. Country A’s currency has depreciated Incorrect
D. Both
A. Country A’s currency has appreciated